Canadian National Railway Company (CNI) Earnings Call Transcript & Summary

Great. Welcome back to day 2 of the 13th Annual Laguna Conference, and we have a whole day of airlines and transportation content today. They say a little rain brings good luck. And so we're hoping for some great updates from all the companies over the course of the day to day. So very happy to start this morning with Canadian National Railroad, our top pick in the North American rail space. I'm very happy to welcome back Laguna, CEO, Tracy Robinson, and CFO, Ghislain Houle. Thanks so much for being here.

Thanks, Ravi. What a great place to happen to be and a nice early start on time performance. We were just teasing shoes up here, but is running shoes, so we'll have to make him work to justify wearing rain shoes here today, I guess, it's the California look.

And I like this place so much. I had to beg Tracy to come this year. She was like, I come here every year. I like your conference. I like the place. And it's a great turnout and we're going to have great meetings today, so we're looking forward to it.

Great. Thanks I think I'll find you by the pool later on.

Inevitably, just send them back in when you find them. Listen, how about I start off with the conference, Ravi, and then I will set the stage for your questions. We'll give you a little bit of the lay of land. As you know, it's a pretty challenging and interesting macroeconomic environment out there and on trade flows. And we're feeling that, without a doubt, we are about flat on volumes year-over-year as we come up to today into the end of the third quarter. But it's a really diversified book of business and so there's strength and then there's areas of relative weakness. Bulk is a considerable strength for us. We've had great grain crops in Canada and the U.S., and we're about to start moving another one in Canada. It's a little bit late to arrive, but it's going to be a nice crop. So that will be good. On the Canadian coal front, Quintette the coal mine is up, we're starting to see those volumes year-over-year start to improve. We have -- it will be a strong fertilizer year for the remainder of the year, year-over-year. So bulk is a great story and very strong for us. The intermodal portfolio has been a little bumpy with all of what's going on from a tariff perspective. We've had a great July, August, up at the Canadian ports, July, August at Rupert, we actually hit that annualized pace of 900,000 to 1 million TEUs a year, which is kind of what we've been targeting. That was great. And we've got dwell of less than 3 days up at Rupert and a great service offering. That now, and I think we've all acknowledged that the peak was early this year. So that volume is coming off a little bit, but we'll finish the year ahead of last year without a doubt. Domestic intermodal has been a great story. We're up 26% this quarter so far. That's based on service. And we're even making some pretty meaningful gains in that really service-sensitive side of the courier business. So you expect that to continue in a strong fashion. The merchandise is where we're feeling some of the tariff pieces. And so Forest Products business, this is a tough business right now. The housing starts, despite the expectations got to start to move at some point, it hasn't. Lumber prices are low. We've seen capacity come out of the Canadian system seeing it comes out of the U.S. system now as well. And then, of course, we've got the tariffs on the Forest Products on the softwood lumber. And so that's a pretty tough market, and we're not expecting that to show any inflection in the near term at all. We'll have to some good strong foundational building blocks for that to happen. We have situations on steel and lumber both ways on automotive ways across the county U.S. border. That's been difficult on those industries. For us, we've been able to mitigate most of that impact so far. The team is out there working pretty hard to find different markets for those products to get into, and we've been pretty successful at that as we go. Industrial Products, with the sand, we've got a great growth story from a sand perspective. The gas inventories in Western Canada right now are pretty high. It's been a bit of a pause on the sand growth for now, but there's nothing structurally wrong with that business. So if you look at it going forward, we've got some great strengths, some areas of challenge. It's a unique environment. And Janet and the team are out there pushing very hard. I like the agility and the intensity that boots on the ground. They're mitigating where we have challenges, and they're leaning into all of those little growth opportunities that are going to get us across the line and solve problems for our customers. And in this environment, where it's volatile and could be softer, we're managing our costs very closely and our costs, whether they are operating costs or capital costs, Janet is leaning in a little bit harder into the share buyback given the share price. And so we're going to manage this tightly. It's volatile. It's difficult to know where it's going to go. There's going to be opportunities, there's going to be challenges and we're going to control tightly what we can control, we're leaning into it.

Got it. That's a great update. Thank you for that. Maybe I'll start with a bit of a high-level question, which is you mentioned it's a very volatile environment. Obviously, and you're prioritizing agility. You are a ginormous company with like massive fixed assets and kind of when one thinks of agile, nimble company, a transcontinental railroad doesn't quite come to mind. How do you make this business agile? Like what can you do within the customers you have, the assets you have to actually make this agile?

Listen, we've been working on that over the last 3 years, and we've been tested pretty hard. So we've got an operating model because of circumstances, we had to demonstrate how we can shut down, start up, respond to anything and get back on track immediately. So operationally, we're incredibly agile. And some of the work that we're doing on cost, we do it weekly. So it's a weekly decision. You don't wait for a quarter or you don't wait for a big long look back, you do that pretty quickly. From a commercial perspective and customers, it means that our first principle is that we have good service and we've had really good service. That makes your relationship with your customers very different, and it puts you besides them from either a problem solving or an opportunity generation. So we've got a great network, right, with lots of advantages in energy and in ag and in industrial products like frac sand, a lot of growth potential. We're working very hard with our customers. Some of that moves and is moving now, whether it's later, whether it's to different markets, whether there's new things coming up, the Canadian government is certainly interested in creating new export opportunities. So from a commercial perspective, it's about knowing your customers well and it's been beside them. Boots on the ground, looking forward and listening closely to where the opportunities are. In some cases, Janet and team are proposing things that our customers haven't thought about in steel and others to get into new markets, and they've been successful in helping. So it's not easy when you're a big company like this, but first principle, we're lean, we run fast. We're consistent. We're tight. And then we just view ourselves as a partner to our customers and we're there with them and for them.

And Ravi, just to add on. So from an agility standpoint, as you know, our biggest cost is labor. So we can furlough people quite quickly. I mean we have about 1,000 people furloughed as we speak. We're starting to call some of them back because of the grain crop. Grain crop is -- and I know you have a question on this, the grain crop is late. So if you look at our grain numbers, Canadian grain, it's lower, but I think we're going to get a good crop. I think we're looking StatsCanada just quoted 75 million metric tons. Just to put this in perspective, a 3-year average is 73 million, and last year, we did 74 million. And some people say that it's going to be even higher than 75 million. So we started to call back some of these people. We have about 200 locomotives part. So we're saving mechanical expenses on those. And then we have cars like lumber is a soft market right now. And we purposely in the past, have leased more of these cars owned so that we can -- we have staggered expiry dates, so that in any given year, we can return a couple of thousand cars to lessors when the market is weak. So we structurally have built ourselves to your point, to be exactly agile because we know that some markets are very cyclical. Grain is not -- grain is steady. So we own most of the grain cars, but we lease a lot of these center beams that I've just talked about.

Got it. Makes sense. Remind me on the grain side when you get the pricing on the crop.

I think the pricing is around 3%, 4%, yes.

3%, 4%.

And it's cost base, as you know, and there's a bit of a lag but I think it's 3%, 4%. But we've had very good pricing on grain in the last couple of years. I think when you look at the 3 years, I think it's over 10%.

Got it. Just a few follow-up questions on your opening comments. You said that peak season came early this year. So do you feel like there has been a significant pull forward of stocking and that kind of impacts the back half? Or like how do you quantify that?

Yes. I think that would be the conclusion of the industry that there's been some pull forward mostly related, I think, to the tariffs, right, and the timing of the tariffs and that makes sense. It's not clear where that tariff situation is going. And so clearly, we've all been watching that. There's been a pull forward of the peak. And what the questions that remain is how much inventory is out there. So what comes behind this forward? How much inventory is out there? And really, as we watch the economy very closely what that fundamental consumer demand is going to look like as we go forward. So there's lots of moving pieces on this, but we're going to see it a little bit softer, but we'll be up year-over-year as the year concludes.

Got it. Forest Product interesting conundrum, if you will, because on the one hand, you have the potential for the housing market to be unlocked and a huge ramp there. On the other hand, I think tariffs are like probably all your end markets, the most significant issue there, right? So how do you -- what do your economists tell you? Like what do you think is going to happen do homebuilders pay the tariff and kind of go ahead anyway or what else?

If you think about it, it's the U.S. Canadian lumber going into the U.S. counts about for 25% right now of U.S. demand. And if you look at the Canadian lumber, we compete with European lumber as imports into the United States. And so you have to watch the tariff situation in Canada versus tariff situation in Europe. The lumber tariffs are high. They're not as high as they are in steel around, but they're high. We don't know where that's going to go. We have seen some capacity come out of the industry. But without a doubt, Canada would participate if there is if and when there is, there has to be at some point, when there is a lift in the housing starts in the U.S., there's a kind of a structural deficit there right now. Imagine we'll wait for interest rates to decline and economic conditions to be a little bit more certain. But it will come eventually. Canada will participate. I don't think we'll get back to the heydays of where Canada was in some of the capacity that's come out of the system. Same kind of things are happening in some places in the U.S. now as well.

Got it. So will you be downsizing assets in that business as well?

Well, that business is largely Western Canada focused. And so as Ghislain has outlined, we are on it already from a fleet perspective. When we look at track capacity, that happens to be -- it move in our biggest growth opportunity area. So as we consider capital expansion, we imagine that the Forest Product is not there, just adjust our capital expansion, what we need to do or don't need to do.

And I would say as well that lumber prices are very low, I mean, you said that a little bit. So you remember, post COVID, lumber prices were USD 1,600 per thousand board feet. It's around $400 to $450. And producers, especially in British Columbia are losing money at that rate. So that has an impact. I think that eventually, it will go back up. But for the short term, it has an impact.

Got it. Makes sense. So you put all that together and when you think of the OR here, I mean, last quarter, you pointed to mix becoming a larger headwind in the second half and makes the 200 basis point improvement harder to hit. So based on everything you see so far, what's the outlook there?

When we look -- when we think about our margins, I mean, there's a lot of factors that go into that. But as we thought about it earlier in the year, we had a certain volume forecast and we had a certain mix forecast that's kind of evolving through the macroeconomic and the tariff situation as we go. And so the mixed issue is just that Forest Products, which is very good business for us is a little bit lower. In Q2 and 3, we've some of the petroleum products for the energy business of it's just a transitional issue with some of the refineries taking extended downtime. Those are all coming back up. So that was more of a temporary issue, but that business down and it's a very good business for us. And it was replaced with the international intermodal business, the OSM, which we love and is an important part of our strategy, but it's not as profitable. So if you think about that mix, that's the mix that the impact that we've had as we lowered through the rest of the year, the energy business is going to come back. I don't think the Forest Products business is coming back. So we'll still have a bit of that mix issue. And of course, volumes overall are lower than what we had anticipated. So we're not going to hit the 200 basis points year-over-year. We are chasing margin improvement really hard. We had 20 basis points in Q1, 50 basis points in Q2, and we're chasing hard managing our cost really tightly, as just said.

Because it's very difficult in a weaker volume environment to totally offset the weaker volumes with the reduction of cost because, as you know, we're a fixed type of business. So I think we will get margin improvement. We're quite confident about this. I don't think we'll get as high as 200 because if you remember, the 200 was in a world where we had assumptions of mid-single-digit volume growth. They're now we said in Q2 that it was going to be low to mid. And I think we're probably going to be at the lower end of that range in terms of volume assumptions for the year. So that's why the 200 is pretty much off the table, but I think we will get some margin improvement when you look at it at year-end.

Got it. And then you said earlier that you're bringing back some headcount that you furloughed. What's the timing on that? What's the quantity of that? And kind of what do you think about that as an OR impact for 3Q?

It's not big numbers. And it's very pinpointed in various locations that we have more grain. We want to make sure that we provide the service to our customers that the customers deserve, and we know we have a big crop ahead of us. So we're actually calling them back as we speak. The good news is the calling success is quite good, like on full-fledged conductors, the calling success is about 90%. And on trainees is about 75%. So people are coming back. And it's very pinpointed location by location. We're being very careful on how many people we call back, but we want to make sure that we move the grain that Canadian farmers deserve for us to be moved.

Got it. So just one more for you, Ghislain, this carbon tax repeal the CAD 70 million, is that just like a net wash between revenue and EBIT like...

That's right. It is. So it's 100%. It's a net wash. Same thing, top line, bottom line. It helps the OR a little bit because it's at 100%, but yes, a net wash.

Got it. Maybe last question on this topic. Just overall on pricing, are your customers more amenable to pricing conversations? Because we had some of the truckers here yesterday saying that, hey, the environment sucks, but like everybody knows, it's extremely inflationary. And so we are able to get through low to mid-single-digit pricing on the trucking side. What are your pricing conversations like? And kind of compared to historical, even within this environment, what do you think you can achieve?

Well, listen, our objective, as you know, is always to bring in more price than we experienced in inflationary on our costs and we're working very hard to keep the inflation down, and we've been successful at bringing in price ahead of cost inflation as we go forward. And that's the high-level kind of number. But the actual reality of this is much more complex as you move between automotive and some of the domestic business, the international business, the chemicals business, they're each separate. But I would say that we are having good conversations on price based more on service, right? Through all of it, the service has been really strong. And the partnership with our customers and getting them into new markets in a very collaborative environment right now because we have joint problems we need to solve, opportunities that we think we can step into.

Got it. I asked one of the IMC's question yesterday about Mexico. Obviously, huge opportunities there with near-shoring and the growth there, but at the same time, maybe not as strong an opportunity as we thought a couple of years ago with tariffs and the fact that nearshoring appears, you have to put a completely automated plant in the U.S. now. How are you thinking about the puts and takes in that dynamic there?

I think there's a big question around Mexico as it is around Canada and what moves it back and forth across the borders there. As we think about where the tariff situation goes, USMCA will come up next year, and there'll be another conversation. So this is a pretty uncertain environment. But we've seen our Mexico volumes grow considerably this year. I think we're up 15% year-over-year to the end of August. And that is partly driven, I mean it's one of the opportunities out of the tariff environment. So that is northbound automotive from Mexico into Canada that's displacing U.S. into Canada. That's pipe that's going from Mexico to Western Canada. And on the other direction, it is plastics and it's fertilizers that are going down into Mexico. So there's opportunities there without a doubt. How it lays out relative to tariffs, it's really a question around what's the long game on the tariffs and the USMCA as that agreement comes up for review.

Got it. Makes sense. So let's shift the topic du jour, which is the proposed rail merger in the U.S. And I would just love your overall thoughts there?

Listen, I wasn't here yesterday, but I did hear that...

Nothing happened.

You had Jim Vena here, who is entertaining, has always been quite confident I hear. And listen, I also hear he's talking again about the Canadian volumes of Canadian ports that are going down in the U.S. with that volume. Let me just say this first, I'll say it again. That volume is a drop compared to what goes through L.A. Long Beach. And most of that volume that comes into the Canadian ports goes down to Chicago. And it goes down to Memphis, like there's bits and pieces that go beyond, but he can compete for that already. So he can just show up and compete. He doesn't need a merger to that. So if he's counting on that volume for his merger economics that he's probably paying too much and I'll just leave it at that. So if you think about kind of reviewing this merger, as you would any merger, you have to think about what are the alternatives. And especially in this industry, we're forced to think about are there other ways to solve whatever the problem is through more collaborative means. And so you've seen the industry really lean into this, not in the last 2 months, but in the last number of years. And so were offering a service with CSX into Nashville. It's because we want our customers that are coming in through Rupert and Vancouver to have that ability and not have to piece it together themselves. Others will also offer services into Nashville. We're offering a service with NS from Atlanta, the link service into Canada where you know about the Falcon service. So we've been at this pretty hard. And this is, I think, the way that the industry has contemplated how you solve this problem, which is largely -- there's no issues with service right now. It's largely how do we collectively pick that truck traffic up off the road and get it on to the railways. And so the STB in 2001 contemplated, and they concluded that these kind of private sector initiatives could -- they could very well provide the same kinds of benefits without the risk that the big rail mergers always bring. This is a big merger. It's very complex. You put these 2 railroads together, it's going to be 40% of the U.S. system. And there's going to be a lot of interesting questions to answer in this. So we haven't seen the application yet. We'll take a look when it comes out. We're kind of running this very proactively. But the STB, and I guess, UP and NS are going to have to think about how they answer the question of whether you can get these benefits in different ways without contemplating the risk to public harm of putting a big merger together. They're going to have to contemplate the downstream impacts of this. And all through kind of the lens of a newer, higher standard of how does it increase competition. And most of the dialogue we've heard sounds a lot more like the old rules, which was really the risk of going to loss of competition. That's not the standard anymore. So it's going to be interesting. This is going to be very complicated. It's going to be interesting to see how they answer these questions. But in the meantime, we're watching it very closely. We are continuing to work all options. As a railroad for us, we have the strongest origination network of any railroad. So we originate 85% of the volumes we move. And right now, we also destined 2/3 of the volume. So you start on CN, you finish on CN. And over the past number of years, what we've been looking to do, that 1/3 that moves from our system to another system or vice versa, that's where we've been focusing. That's been an important priority of mine since I've got here. How do we give our customers that seamless type of service. So whether it's a steel wheel service right into Nashville or whether it's Monterrey to Toronto, how do we work together as a railroad. Times are different. When I got into this industry way too many years ago, we developed very differently with each other. Today, we know as railroads, we can be partners and we can be competitors at the same time. And the industry, I think, is all thinking about this. So it will be interesting to see what they put, how they address those questions and how the STB responds. But we're going to do everything we need to do to protect our network and the competitive access for our customers.

Got it. I'm going to ask you about Nashville in a second, but you spoke about the downstream impact. I'd say the most immediate downstream impact would be if this merger goes through, what does it mean for Falcon service? So have you thought about like are there benefits? Does it expand the operation? Or what do you think of this?

Well, we'll have to see kind of what they're offering. I think without a doubt, when you think about to the lens of how do you increase competition, some of the concessions that are going to have to be considered are going to be. I would expect most of the concessions that come forward as part of this is going to be quite considerable, especially, as I said, with the prospect of having to demonstrate that you've increased competition somehow. And so I think this whole industry has changed over the years, and you saw it a fundamental change when CPKC got together. And all the railroads, the doors opened up and we started to think differently about how to do this. And this is a continuation of that. And I think we've demonstrated, and I think we all would say we've demonstrated the ability to do that.

Got it. So the next one is a partly merger, partly Falcon service question, which is how is that going? And is that a poster child for how well an interchange handoff network and work that maybe can be evidenced here?

Yes, this is probably the standard of one of the toughest ones, right? It goes through 3 countries, 3 railroads crosses a pretty difficult border on the U.S. Mexico side and the service is consistent. And that's a large part because of the commitments that the 3 of us have made to each other, which is exactly what I think the STB contemplated and what motivated parties can do if they try to get together. And so it's a 5-day service, and it runs in a very narrow band around that even with some of the border issues you can run into Mexico. And so it's improved since we watch the volumes very closely. It's improved since last quarter. It's not up as high as we saw a downturn in it when we had the labor issues in Canada last year. It's not back up to where it was. But it is kind of, I think, one of the standards that are being set.

Got it. So talking about the new CN CSX service into Nashville that you just announced. How does that come together? Did you -- obviously, your peer in Canada also has a part with the CSX? So I mean, honestly, are these conversations awkward or kind of -- or how do you put these together? And how would you pick Nashville? And kind of -- or do you think there are more routes and more cities like that?

Absolutely. So we've been working with CSX for the same period of time we're working with in NS. For the same period of time we've been working with UP on and on it goes. This is, as I said, a priority for me to look at. Here is the benefit of the railway. You open up a rail map of North America. I've been in the pipeline business, very different. You open up a rail map in North America, you can get from anywhere to anywhere already with the network that we have. What you have to do and what we have to do is figure out how to make it easier to navigate between the railroads, right? And so this is -- we have work underway as to most other roads with every other railroad. This is not about dating exclusively, for picking an exclusive partner or doing a merger. This is around looking at our customers in the markets that we could get them into and providing the service that makes the most sense and getting there and then putting the kind of operations in place, it's going to underpin it. So for us, Nashville is one of the biggest growing markets in that part of the United States. We want to give our customers that are coming through the Canadian ports, the option to get in their steer wheel, right, with all that kind of consistency. They'll have the option of going through L.A. Long Beach, if they go through the BN CSX service as well. But this is about creating services for your customers so that they could best utilize the fullness of the North American rail network. And so we're working on that with NS. As you know, we announced the link service not too long ago. We're working with UP on it. And so we announced some of these as they come. But underneath that, there's -- we meet regularly, our teams meet regularly to monitor the progress that we're making on the work that we've already done, Jim and I and Fernando meet on Falcon as well as where is the next opportunity. What are we hearing from our customers? And that evolves. We were working with CSX on the whole EV piece where the batteries were being built versus where the cars were being built. And there's a great opportunity there. It shifted a little bit this new environment. So you have to be nimble as well. But as you get to know each other, it's easy to spot these opportunities. And so there's work going on right now with every single one of them.

Got it. And it's also about extending our own network reach because, as you know, to grow volumes, one of the things you need to do is extend our network reach. So because railroads, you can't replicate a railroad like we have 8,000 bridges. That's the key, but you can't -- like you go to where you go and you don't go to where you don't go. So we believe that we can extend our network reach. We can help CSX and other railroads extend their network reach and reach markets that they wouldn't be able to reach on their own, but we don't need to do this through mergers. We can do this through partnerships. If the partnership is well structured. And if the information flow between the 2 railroads is well done so that you work as a 1 single line railroad to cover America. That's what we believe and that's what we've been trying to do and that's what we're doing. And I think that the Falcon service will be the role model, hopefully, for how railroads need to work together as a partnership to get long-haul truck traffic. We're not talking about short-haul. We're talking about long-haul truck traffic back from the road to the railroad.

If you think about CN, I mean, one of the things we bring to bear is that origination network 85% of our volume is there. We want to get it into market. We're a great partner, but not just for 1 railroad for every railroad.

Got it. Makes sense. Maybe kind of switching gears well and doing a little bit of a look back almost. So you've been CEO for a little bit 3 years now, and you came in with this big reset plan, kind of very bold ambitions. But unfortunately, you haven't really had a chance to show what you can do because it's been a down cycle kind of ever since, right? And at the same time, there's been multiple instances of expectations recalibrations across the industry, you guys as well, I know I have been wrong with my estimates. But what are the takeaways here? What are some of the learnings you can take away into how we use this for forecasting or looking forward?

So we've -- as you say, Ravi, we've had to kind of reset expectations a number of times. I'm not happy with that. None of us are, as we think about it. Back when I came in, we had 2 objectives. We want to get the railroad running really well. We've got the right operating model. And then we look to where we saw growth. And at the time, the forecast was there for economic growth. We were about to hit the turnaround. And then we saw -- our job is to figure out how we leverage our network to the best purposes for our customers. And we saw some very specific growth opportunities in that. And so as we -- and we laid out kind of multiyear guidance. Now that economic growth has not materialized, and probably won't for the next period of time. And if we think about -- and we've had kind of 2 success years of issues that we didn't anticipate, where the Canadian ports had labor-related shutdowns, which was very damaging and where we had a Canadian rail labor issue. So we haven't generated the growth that we had originally contemplated. And that -- we regret that, right? That's unfortunate, and we wanted to do more. And so it does factor into our thinking as we go forward. Not happy about kind of how that has unfolded. What I am happy about is how the team has responded, right? So if you think about over the last 3 years, we have this railroad running really well. And as we push through all of that turbulence, we talked about it just a few minutes ago, they have the ability to run this railroad through almost anything, whether it's shutting down and starting up or when it's any of the issues that are out there. If you look at our car velocity, it's averaged over that time each year, more than 200 car miles per day, which is kind of surprising given you have to bring the full thing to a halt a couple of times a year over the past 3 years. If you look at our customer services, it continues to be very strong. It's not just that it's strong, it's consistent. Our pricing has come in exactly where we wanted it to. And if you look at some of that sector-specific growth, whether it's the NGLs or whether it's the frac sand or the refined products or the growth we targeted in grain. All of those have grown over that period of time from anywhere from 15% to 50%. And it's been offset by some of the macroeconomic. So we've managed our costs really well. We had expected and had planned for more volume than we've got. But we managed our costs through the turbulence through kind of the changing macroeconomic pretty well. So as I reflect and look at the results, we haven't generated the growth that we promised, and we're feeling that. But what we have generated is more growth in that period of time than any other railroad CPKC, which is a merged entity, right? We've had been in the top 2 of operating ratio. So our margins every single one of those years. And as you said, our EPS has kind of been in the pack. It's not what we promised, and we are an organization that needs to deliver, do what we say we're going to do. So as we think about it going forward, this environment. It's more volatile than it has been, I think, in the past, and I don't see that volatility changing. And so as we think about what the lessons are and what this looks like going forward, we're doing a lot of thinking about that. But I can tell you that it's less certain environments, and that will be factored into kind of how we think about setting expectations going forward.

Got it. You recently pulled your long-term guidance. You had a very useful Investor Day 3 years ago where you kind of laid out those targets? Are we thinking of another event in '26 or do you just need more clarity to get a sense of...

I think we have to assume that this kind of volatility, this is the new normal, right? And so we need to set expectations within this new normal. And so I think we will be less certain we will need to be more nimble and ready. I mean we have done, I think, a pretty good job in responding to what's happened. We're going to have to continue to do that but plans through all kinds of scenarios. And so we'll be out next year in some way, to give you a sense of how to think about expectations and whether it's a full Investor Day or not, we probably will, but we haven't kind of landed on that.

Understood. Any questions in the audience? If not, I'll keep going. Just kind of -- obviously, you guys have been a big leader in technology investments in this space over the years. I remember your Investor Days back in 2017 and even before that. Can you just talk about some of the latest initiatives that you guys have going on right now, whether it's kind of on the AI side or on the physical hardware side?

So our technology investments are always focused on 3 things. One is safety. We've seen tremendous impact on safety with some of the wayside technology and the automated inspection of the tracks. If you think about engineering-related incidents,derailments have fallen 90% over the last 10 years, and that's a pretty significant impact. So that is an investment that we like, not only from a return perspective. But safety is always is our key value and key priority. It's also good business. So it's safety is the first one. It's operational efficiency, just related, so if you're from a safety issue, they're impacting operational fluidity. And then the third one is automation, right, as we go forward. And the opportunity in this area is significant. And as we think about going forward, the 3 of them can come together. So automation is the next level of opportunity, even when we think about safety environment, the more you can move the human factor and rely on technology, there's opportunity there. The capability is of AI. I think we're only starting to scratch. We've got to be careful there. Because it's easy to go fast on these things and not get any benefits. So we want to be thoughtful, but the benefits on automation from AI, whether it's in the rail yards, whether it's in the back office or whether it's in how we are anticipating volume and finding the best routes from a velocity perspective. So we're in the midst of kind of some renewals. We're doing the new SAP S/4HANA. We're doing some of the basic systems renewal. You've got a cloud program going on that's going to allow us to access and utilize the data. And then we're doing the strategies around kind of what the next level of investment but it's all going to be focused on safety, operational solidity and then that automation benefit.

Just on topic investments, maybe good place to end, then would be CapEx and investments going forward. Obviously, there's been some scrutiny of the CapEx spending given growth expectations shifting? So where do you see that going?

Let me take this one, and then I'll give you Ghislain. So we set our capital investment for our network based on kind of the maintenance that we need to keep it running effectively, the capacity expansion that we need to move the volumes, the growth that we're going to have and then kind of whatever debottlenecking. So far, like this year, we're $150 million below where we were last year. We've got a lot of productivity benefits that we're leaning into and we're getting momentum. The capacity expansion that we're investing. It's all been kind of the Western corridor, and we've done some expansion around the EJ&E. And so most of that is Edmonton to Vancouver where we've seen more than 20% increase in GTM since our last peak. And so there's been some volume and that Edson Sub from Edmonton to Jasper is the critical kind of piece for us because every train, whether you go into Rupert, or we go into Vancouver touches that. We've done a little bit in support of the frac sand where our customers are investing in Northeast BC, and we're twinning a bridge, the Zanardi Bridge since Rupert. All of that is largely done. But what will be by the end of this year, we'll have one kind of double track segment just outside of Vancouver and the finishing of the Zanardi bridge that will come -- that will finish off over the next 2 years. So you can get the benefit. We've done what we need to do. We're in great shape. Our locomotive fleet, our car fleet is where it needs to be. So you're going to see a lot of the opportunity for that to come off. But I also want to make a comment on what Pat Whitehead's team and the engineering guys. We set them a very specific piece of work around to drive some discipline and some excellence into how we plan capital and how we execute it, and we're starting to see the benefits of that. So if you think about this year to the end of August, we've reduced about $120 million in contractor spend by investing $20 million in labor and equipment ourselves, right? And you're seeing it across every metric. I think our tie installation, we've reduced it by $17 a tie, but we're installing 1.5 million ties. The zone capital is off by $20 million in unit cost. And so -- and we've been able to absorb all the inflationary impacts on the OpEx side of engineering. So the momentum that we're getting here is going to really kind of factor into our capital planning as we go forward as well. And by the way, they've done that all while reducing the safety incidents, personal injuries by 30%. So there's great momentum there. You're going to see ourselves kind of factoring all of that into capital going forward. Did I miss anything?

No. You covered it very well. Do you want to say a few words on conclusion -- as we conclude because I think we're up.

Yes. Listen, Ravi, thanks for hosting. We're looking forward to the meetings that we're going to have today. Without a doubt, this is an unusual environment where we're talking about it earlier, and it's going to be very volatile. We think the best thing that we can do through this, you run lean, you run a great railroad, you run fast. You get good service to your customers that put them behind you and beside you. There's going to be opportunities, there's going to be challenges. But we're out there on the ground and on it, and we'll get there.

Got it. Let's hope for some settlement in macro conditions, but I know you guys have it covered itself. Tracy and Ghislain, thanks so much for being here.

Thank you.

Thank you for having us.